NEW YORK (TheStreet) -- Shares of Medtronic Inc. (MDT - Get Report) are flat in pre-market trade as the heart rhythm devices maker evaluates a takeover of U.K.-based Smith & Nephew Plc (SNN - Get Report) that could see the U.S. company move its tax domicile overseas, sources told Bloomberg.
Shares of Smith & Nephew are down -4.65 to $92.75 in pre-market trade.
Smith & Nephew has a market value of about $15.9 billion and is aware of Medtronic's interest as are investment banks, sources added. Medtronic's preparations for a bid are at an early stage and no offer is imminent, the sources said.
TheStreet Ratings team rates MEDTRONIC INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
"We rate MEDTRONIC INC (MDT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 3.3%. Since the same quarter one year prior, revenues slightly increased by 2.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has increased to $1,328.00 million or 11.87% when compared to the same quarter last year. In addition, MEDTRONIC INC has also modestly surpassed the industry average cash flow growth rate of 7.62%.
- MDT's debt-to-equity ratio of 0.61 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.24 is very high and demonstrates very strong liquidity.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- You can view the full analysis from the report here: MDT Ratings Report